Why Russia is Spending Millions of Dollars on Gas Every Day

Russia is burning about $10 million worth of natural gas a day near its Finnish border, analysts say, even as it threatens to push Europe into a winter energy crisis by restricting exports to Germany and other countries.

State-owned gas giant Gazprom is spending, or “burning,” about 4.34 million cubic meters of gas a day at a new liquefied natural gas (LNG) facility, according to analysis of heat levels and data. satellite from Rystad Energy.

This equates to 1.6 billion cubic meters annually, or about 0.5% of the block’s gas demand, and is worth about $10 million a day based on last week’s European spot gas price. Rystad’s analysis was first reported by the BBC on Friday.

The burning at Gazprom’s Portovaya plant is an “environmental disaster”, Rystad said, with around 9,000 tonnes of carbon dioxide being emitted every day. That’s the same amount of emissions produced over the course of an entire year by more than 1,100 average American households.

The plant is next to a compression station at the beginning of the Nord Stream 1 pipeline, one of the main arteries transporting Russian gas to the European Union.

Rystad said Russia was flaring gas that would otherwise be exported to Europe via the pipeline, which typically accounts for more than a third of Europe’s gas imports but where flows have been reduced to just 20% of levels. normal.

Gazprom, Russia’s state-owned energy company, did not immediately respond to a request for comment from Russia. CNN .

Overall, Russian gas exports to Europe are down 77% so far this year compared to the same period in 2021, according to Rystad. Last year, Moscow accounted for 45% of the European Union’s total gas imports, data from the International Energy Agency show.

The bloc has been trying to get rid of Russian gas since the invasion of Ukraine six months ago. It is racing to fill its storage facilities, reduce its demand and secure alternative sources of energy to avoid having to ration energy this winter.

So why is Russia sending some of its precious gas up in smoke? It could be part of routine operations – or it could be sending a message to Europe.

“The blazing flame is highly visible, perhaps indicating that the gas is ready and waiting to flow to Europe if friendly political relations resume,” Rystad said in his note.

Routine procedure?

The Portovaya LNG facility is due to open later this year, Rystad said, and flaring usually takes place as part of routine safety testing of new plants.

But, “the likely magnitude and duration of this period of continuous burning is too extreme for this to be the only explanation,” he added. “This type of flaring has never happened in history,” Zongqiang Luo, a senior gas and LNG analyst at Rystad, told CNN Brasil Business referring to the levels of radiant heat detected in the area.

“For the Portovaya LNG facility, this type of flaring is very large,” he added.

Henning Gloystein, director of Energy, Climate and Resources at the Eurasia Group, told CNN Business that Russia is likely burning gas created as a by-product during oil production.

“In normal times, much of that gas would have been used to feed the pipeline network and sold to Europe. As Russia drastically cut supplies to Europe, the gas initially went to Russian domestic storage. the gas has nowhere to go, so it’s being flared,” he said.

Operational problems?

Russia may be facing several problems.

Mark Davis, CEO of Capterio, a company that advises energy companies on how to burn their gas, said the practice is common across Russia. “I think it’s more likely an operational issue that operator Gazprom is struggling with,” he told CNN Business. One explanation could be equipment failure.

But the location raises questions. Gazprom will likely have transported the gas a great distance from the Yamal gas field to the Portovaya plant, Rystad said, when it could have been flared closer to the source.

“The cost of compressing and transporting gas from the Yamal field to the Baltic Sea is also likely to generate unnecessary losses for Gazprom,” he said. Managing Russia’s extensive gas infrastructure is complex, he added, so the choice of location to flare the gas could be down to a lack of coordination between operators.

A message for Europe?

Russia may also be sending a message to Europe. “[Rússia] may be making a political point, trying to say [para a Europa] ‘Look, we have this gas, and we’re burning it, you’re choosing to make it difficult for us to get it to market,”‘ Davis said.

Rystad began investigating the Portovaya gas flaring after people in Finland spotted large blazes in July.

Russia has been embroiled in an energy standoff with Europe since it invaded Ukraine in late February. In recent months, Gazprom has reduced flows through Nord Stream 1 due to a dispute with the West over a missing turbine. It has also completely cut off supplies to other EU states over its insistence that “hostile” countries pay for gas in rubles rather than euros or dollars.

“Environmental disaster”

In addition to the CO2 the flame is releasing into the atmosphere, it is likely also damaging the environment in other ways. Davis said the burning would likely produce soot that is particularly destructive to the Arctic region. Much of the soot will end up in Arctic ice and absorb more heat from the sun, accelerating the melting of the ice.

“Almost certainly, the flame is not operating at 100% efficiency and therefore is also emitting methane, which is 80 times more potent as a greenhouse gas than carbon dioxide,” Davis said.

*Nadine Schmidt and Mark Thompson contributed reporting